Indonesia expects to seal final LNG deal with Sempra Q1 2004

Indonesian upstream oil and gas authority BP Migas expects sales and purchase agreement (SPA) to supply Indonesian LNG to North America with US energy firm Sempra Energy could be sealed in the first quarter of next year.

?We are working to seal the final deal with Sempra in the first quarter of next year,? said BP Migas chairman Rachmat Soedibjo late Saturday.

On Thursday, BP Migas, together with Anglo-American giant BP Plc., signed signed a Heads of Agreement (HoA) with Sempra Energy LNG Corp. for a 20-year supply of liquid natural gas (LNG) from Indonesia to markets in the US and Mexico.

Under the agreement, 3.7 million tons of LNG per annum will be delivered from the BP-operated Tangguh fields in Indonesia over a period of 15 years beginning in 2007 to Sempra's proposed LNG import and re-gasification terminal near Ensenada in Baja California, Mexico.

The agreement also provides for an additional five years of LNG supply to Sempra's terminal from other Indonesian LNG sources.

Rachmat said the price benchmark for the deal was Southern California (Socal) index price. Socal index was the benchmark natural gas price uses in Southern part of California. He, however, did not give detail who will bear loss if the index price falls below US$ 4 per MMBTU, which is considered production and shipping cost for Indonesian LNG to reach west coast America. ? Based on our observation and statistics, we are optimistic the long term average price will not go below $4 per MMBTU,? he said.

Meanwhile, Rachmat also said negotiation to supply LNG to the same market with another US oil company Marathon Oil is still ongoing despite the signing of HoA with Sempra.

?Talks with Marathon are still on going with pricing as the biggest issue,? said Rachmat. Rachmat did not rule out the possibility that Indonesia will supply LNG for both companies. ?That will depend on whether both companies gets permission from Mexican government to build LNG terminal in Mexico,? said Rachmat.

Indonesia had signer MoU to supply Marathon up to 6 million tons of LNG per year for its Tijuana Regional Energy Center. Both Sempra and Marathon are in the process of getting necessary permits from Mexican government.(alex)